BSP raises policy rates by 50 basis points

September 27, 2018

The Bangko Sentral ng Pilipinas' policy-setting body raised rates by another 50 basis points to bring the overnight reverse repurchase facility to 4.5 percent on Thursday as it signalled taking a tough stance against inflation.

The new rate takes effect on Friday. Policy rates have now risen a total of 150 basis points or 1.5 percent, as inflation rose to near nine-year highs due to tight food supplies and high oil prices.

"Latest baseline forecasts have shifted higher for both 2018 and 2019, with risks to the outlook still leaning toward the upside," the Monetary Board said in a statement after the meeting.

"The Monetary Board believed that a tighter monetary policy stance will help steer inflation toward a target-consistent path over the medium term by reducing further risks to the inflation outlook, including those emanating from exchange rate volatility given the continued uncertainty in the external environment amid geopolitical tensions and the normalization of monetary policy in advanced economies," a statement by the board said.

The BSP said it hiked its inflation forecast to 5.2 percent from 4.8 percent for 2018 and its 2019 inflation is seen at 4.3 percent from 3.7 percent. In August, inflation rose to 6.4 percent from 5.7 in July.

The inflation rate has been rising since January. DMS